K5 Billion Strengthening SME Ecosystem, Building Local Currency & Capital Confidence
The forthcoming K5 billion SME Credit Guarantee Fund will mark as a significant policy step by the Bank of Zambia toward unlocking private sector growth and reducing structural financing barriers that have long constrained SMEs.
Guarantee schemes are now globally proven instruments that de-risk lending portfolios for most banks, enabling them to extend loans to smaller enterprises with more confidence and at lower collateral requirements.
For Zambia, where over 80% of businesses are SMEs, this initiative could catalyze job creation, foster value addition and strongly engage with supply chain resilience.
Furthermore, the move to reinforce Kwacha usage in domestic transactions will also help stabilize the local currency demands and curb dollarization, a persistent challenge that undermines the credibility and effectiveness of the monetary policy strategies.
By ensuring that all local settlements are conducted in Kwacha, the BoZ is positioning the local currency as a stronger anchor for economic transactions and financial reporting especially successfully made export proceeds framework directives with a strong grip with USD 160 million on transaction cards.
However, successful implementation of de-dollarisation will depend on stakeholder sensitization, transparency in fund management and alignment with fiscal policy measures that promote SME growth through procurement access, tax incentives, and simplified compliance regimes.
Overall, the two policy measures of the Credit Guarantee Fund and Kwacha settlement regulation represent a cohesive strategy tactically designed to strengthen domestic liquidity, empower entrepreneurs and enhance Zambia’s monetary sovereignty in the midst of global trade tensions and policy uncertainties.
